Pick n Pay gets a new CEO – as it warns of major loss
Sean Summers will return to Pick n Pay to replace Pieter Boone as CEO with immediate effect – as the group warns that it expects a huge loss for the first half of the 2024 financial year (H1 2024).
“I want to thank Pieter for his dedication to Pick n Pay over the past two-and-a-half years. He became our CEO while the Covid pandemic was still raging, and has led the business through some extraordinary challenges, including the transition out of the Covid lockdown, the unprecedented civil unrest in 2021, and the current load shedding crisis,” Chairman Gareth Ackerman said.
“Despite this, he devised and led the launch of our Ekuseni strategic plan, overseeing the very pleasing acceleration of our Boxer, Clothing and Omnichannel growth engines, and launching our new QualiSave brand.”
“Unfortunately, in a very difficult environment, the performance of our core Pick n Pay business has been very challenging over the past months and has not met expectations. Pieter accepts that the Board has decided on a change in leadership.”
Summers worked with the group from 1974 to 2007, becoming Managing Director in 1997 and CEO in 1999. He will relocate physically to South Africa over the coming weeks and spend time analysing the group’s business.
“We are delighted that Sean is coming back to Pick n Pay. His knowledge and experience are unrivalled. He is passionate about getting Pick n Pay back on to the right trajectory, and winning the trust and confidence of customers new and old. He is absolutely the right person for the job at this time,” Ackerman said.
“I am very excited to be coming home to Pick n Pay. Retailing is my passion, and this company is in my blood. I have great excitement and energy for the task ahead. I look forward to leading the Group back to the position it deserves,” Summer said.
Financials
The group said that H1 FY24 (26-week period ended 27 August 2023) was incredibly challenging due to the competitive industry, load shedding costs, and weak consumer environment.
Despite strong sales momentum in the Ekuseni growth drivers of Boxer, Online and Clothing, this was offset by muted sales in the Pick n Pay SA supermarkets due to gross profit margin pressure and load shedding costs.
The group’s sales growth in its various businesses for H1 FY24 can be found below:
- Pick n Pay SA – 0.3% (0.8% like-for-like)
- Boxer SA – 16.1% (4.2% like-for-like)
- Clothing sales in stand-alone stores – 13.8%
- Group liquor sales – 9.6%
- Online sales (driven by Pick n Pay asap! and Mr D) – 76.3%
- SA Total Sales – 5.1%
- Rest of Africa – 14.4%
- Group turnover – 5.4%
Financial losses
Despite overall sales growth, the group said that it expects incremental abnormal costs for H1 FY24 to hit R565 million due to the following:
- Total diesel costs to run generators of R396 million, and net incremental energy costs of R190 million;
- R116 million duplication of supply chain costs during the Longmeadow / Eastport handover;
- R259 million of employee restructuring costs, primarily due to the Voluntary Severance Programme (VSP) and Junior Store Management restructuring, which were concluded during the period.
Amidst these heightened incremental abnormal costs, the group no longer expects to make a profit for H1 2024.
“The more negative performance relative to the group’s previous guidance is due to gross profit margin for the period being below our previous expectation,” it said.
“This was a consequence of a highly promotional trading environment, which impacted both sales growth and gross margin, and included the impact of supplier incentive income for the period being finalised at below our previous expectation.”
Ultimately, the group expects headline earnings per share to drop to a loss of between -149.36 to -129.82 cents per share in H1 FY24 from a profit of 97.73 cents in H1 FY23.
Despite continued headwinds, the group does expect earnings to be materially stronger in H2 FY 24, boosted by more supportive earnings seasonally, energy costs being comparatively lower from a high base, non-repeat supply chain disruption and efficiency gains from H1 FY24.
The group’s financials for H1 FY24 can be found below:
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